Broad decline weighs on Toronto market as trade war worries hit U.S. stocks

Ian Bickis

April 06, 2018 - 2:20 PM

North American markets saw broad declines Friday after President Donald Trump proposed more tariffs on Chinese goods.

The announcement late Thursday that Trump was considering duties on an additional $100 billion in goods imported from China marked a shift in tone from U.S. officials earlier in the week that the U.S. was looking to negotiate a resolution to the trade dispute.

The latest potential tariffs come on top of the tariffs the U.S. has proposed on US$50 billion worth Chinese goods, which China promised to match earlier this week, and an earlier back-and-forth after the U.S. imposed tariffs on steel and aluminum.

The day-to-day shifts in trade sentiments are now dictating markets more than the underlying health of the economy, said Jamie Robertson, senior portfolio manager at Manulife Asset Management.

"Rhetoric is supplanting fundamentals at this particular point. The economic data both in the U.S. and Canada continues to show the economies are doing well...but clearly the market's completely preoccupied with the spectre of a trade war between the U.S. and China."

"You flip and flop around when you get into these periods of volatility we're into now," he said.

The S&P/TSX composite index closed down 148.64 points at 15,207.41, to leave the index down 1.04 per cent for the week.

U.S. indexes saw declines of more than two per cent on Friday as trade concerns hit the U.S. more than other markets, said Robertson.

The Dow Jones industrial average was down 572.46 points at 23,932.76. The S&P 500 index was down 58.37 points at 2,604.47 and the Nasdaq composite index was down 161.44 points at 6,915.11.

Despite the market retreat, Robertson said he still believes the tariff threats are more of a negotiation tactic.

"I think the market believes there may be some fire to this smoke, but I think it's still negotiating tactics at this particular point. We saw this with NAFTA and we're clearly going to see it with China as well."

The Canadian dollar averaged 78.35 cents US, up 0.08 of a US cent as Statistics Canada said the unemployment rate stayed at 5.8 per cent for a second consecutive month to match its lowest level since the agency started measuring the indicator in 1976.

The dollar climbed despite a drop in oil prices that saw the May crude contract end down $1.48 at US$62.06 per barrel, though it was still well within its recent range, said Robertson.

"Oil at this particular point is pretty well contained sort of between US$58 and US$68 and when you get in some of these situations where you get concerns for risk assets, I think that oil should move to the lower end of that range."

The May natural gas contract was up three cents at US$2.70 per mmBTU.

The June gold contract was up US$7.60 at US$1,336.10 an ounce and the May copper contract was down one cent at US$3.06 a pound.

OPINION The tight integration between oil companies, governments, and the rest of the economy has led to chaos in the oil markets recently and will have predictable effects in the months and years to come. Those makin